Crops Analysis (VIP) -- May 10, 2013

May 10, 2013 10:20 AM
 

Corn

Price action: Corn futures closed around 9 to 12 cents lower today with the exception of the May contract, which was 6 3/4 cents lower. Bears controlled price action through the week.

5-day outlook: USDA is likely to show planting around one-quarter complete in Monday's update. While that will be well below the average pace, it would represent the best planting week of the season so far. Despite the planting delays, price action signals traders aren't concerned yet. Given bearish attitudes, buying interest will likely remain limited to brief stints of short-covering.

30-day outlook: USDA's 158-bu.-per-acre yield projection is 5.6 bu. per acre below trendline and is based on 60.5% of the crop being planted by May 15. That seems like a stretch at this point. If planting is below (well below) that anticipated level by mid-month, USDA may have to further lower its yield forecast in the June Supply & Demand Report.

90-day outlook: Traders are convinced the heavy spring precip is beneficial long-term, while producers are fretting over planting delays. Weather during the key pollination and grain-fill stages will likely determine which turns out to be more accurate.

Hedgers: 100% sold on 2012-crop in the cash market. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Soybeans

Price action: Soybean futures finished 9 to 13 cents lower, losing ground near the end of today's trading from the bearish USDA Supply & Demand Report. The November contract traded briefly under $12.00 before closing at $12.05 1/2. That contract finished the week down about 15 cents from a week earlier. However, the old-crop July contract finished the week about 11 cents higher.

5-day outlook: Tight old-crop supplies, firm cash prices and strong basis will continue to provide support to old-crop futures. But the bearish 2013-14 outlook from USDA will keep new-crop futures under pressure and make rallies in old-crop contracts difficult.

30-day outlook: Not surprisingly, weather will have a sharp impact on trading over the next month. If weather turns favorable for corn planting and worries of a switch to soybeans subside, the trade may feel it has already factored in enough of an increase in planted acreage. That could stop the slide in new-crop futures. But if corn planting delays continue into month's end, look for a potential new-round of selling pressure in November soybean futures as the trade accounts for an increase in soybean acres.

90-day outlook: It's going to be difficult for awhile to get bullish news for soybean prices as spring planting normally brings optimistic outlook for production and Brazil will dominate the export front this summer. But any sort of surprise on the export front or from a sudden shut off in precipitation could pop prices.

Hedgers: 100% sold on 2012-crop in the cash market. 50% of expected 2013-crop production is hedged in November soybean futures at $12.19. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

Cash-only marketers: 75% sold on 2012-crop production. 10% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

 

Wheat

Price action: The wheat market extended early losses on the release of USDA's report data. Kansas City wheat ended roughly 20 cents lower for the day, while Chicago was 16 1/2 to 19 1/2 cents lower. Minneapolis futures posted losses of 16 to 17 cents. Today's action resulted in a slightly lower weekly close for all three locations.

5-day outlook: The market will receive another reminder of the poor state of the HRW wheat crop on Monday, though the report could show the damaged crop stabilizing as the region saw beneficial rains this week. Otherwise, action in the wheat market will likely remain tied to that of corn and outside markets.

30-day outlook: As has been the case in recent sessions, the world outlook for sufficient wheat supplies got more attention than domestic crop prospects today. USDA's first look at U.S. winter wheat production came in about as expected, as did its old- and new-crop carryover projections. Global wheat stocks of 186.38 MMT will likely remain a limiting factor unless concerns about dryness in Australia or production troubles elsewhere heighten.

90-day outlook: If production concerns around the globe mount or the U.S. corn production outlook is threatened, the poor state of the U.S. HRW crop will gain more attention. The latest long-term weather outlook calls for above-normal temps with average to below-average precip for the drought-stricken Plains, signaling this is certainly a possibility.

Hedgers: 75% sold on 2012-crop in the cash market. No 2013-crop sales advised yet.

Cash-only marketers: 75% of 2012-crop is sold. No 2013-crop sales advised yet.

 

 

Cotton

Price action: Cotton futures ended more than 100 points lower in all but some of the far-deferred contracts today, but finished higher for the week.

5-day outlook: Cotton futures showed signs of breaking out of the downtrend from the March highs this week, but today's price pressure signals the move may have been a bull trap. If followthrough selling from today's losses in seen next week, bears would keep the upper hand.

30-day outlook: Traders are showing some concern with the slow planting pace and lingering drought in Texas. That may be enough to limit selling interest and could provide a spark if those concerns persist much longer.

90-day outlook: While USDA forecasts U.S. carryover to tighten in 2013-14, global stocks are expected to swell to a record 92.74 million bales, which would be the third consecutive record. Of that total, China is expected to hold 63% of world stocks by the end of 2013-14. While active Chinese buying is expected to continue through the new marketing year, current price levels "feel" heavy.

Hedgers: 50% of expected 2013-crop production is hedged in December cotton futures at 83.87 cents. 50% of expected 2013-crop production is also sold via cash forward contract for harvest delivery. 100% sold on old-crop in the cash market.

Cash-only marketers: 85% sold on old-crop. 50% of expected 2013-crop production is sold via cash forward contract for harvest delivery.

 

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